Appeals court rules state can raid State Comp Fund to balance budget - Your West Valley News: Surprise

Appeals court rules state can raid State Comp Fund to balance budget

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Posted: Saturday, November 24, 2012 4:30 am

PHOENIX -- Arizona lawmakers are free to raid cash for injured workers in the State Compensation Fund to balance the budget, the Court of Appeals ruled Friday.

Reversing a lower court ruling, the judges said it was the Legislature itself that authorized the collection of money from employers. What that means, they said, is lawmakers are free to take that money for other uses.

Judge Maurice Portley, writing for the unanimous court, acknowledged that the money in the account is earmarked to pay the medical bills and lost wages of workers who are injured on the job. And he said those workers have "vested interests or rights'' in those payments.

But Portley said attorneys for the fund as well as a host of employer groups presented no evidence that taking nearly $4.7 million from the fund would prevent it from being able to meet its obligations.

And even if that were the case, he continued, there is a separate law which details how money must be transferred into the fund.

Under Arizona law, all companies are required to provide coverage for employees who are injured or killed in work-related accidents. Some firms buy private insurance; others self-insure.

The Industrial Commission, which administers workers' compensation laws in Arizona, also maintains a special fund for cases in which an employer has not obtained the proper insurance. The cash earmarked for medical bills and other benefits for injured workers.

It also provides coverage for workers who, having been injured elsewhere, are hurt again. That is designed to encourage companies to hire these previously injured workers.

The account is funded by a special levy on employers.

Lawmakers, looking to balance the 2009 budget, voted to take money from various special accounts, ranging from the Central Arizona Project to tobacco-education funds. The special fund at the Industrial Commission was one of those on the list.

Gov. Jan Brewer signed the legislation authorizing the fund transfers.

The commission sued, as did business groups, contending the "sweep'' exceeded legal authority.

Two years ago, Maricopa County Superior Court Judge Larry Grant ruled that the governor and lawmakers broke the law. He said the fund is legally required to hold the money "in trust'' for the benefit of injured workers.

An appeal to the Arizona Supreme Court remains possible, not so much because of the amount of money but because of the precedent the ruling could set.

During the legal fight, Farrell Quinlan, director of the Arizona chapter of the National Federation of Independent Business, said employers have a financial interest in the workers' compensation system being solvent. He said that's what made Grant's original ruling significant.

"The court agreed with NFIB and other plaintiffs that the special fund was never intended to be an optional piggy bank ready to be broken open when the state can't balance its budget,'' he said.

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